US and European futures are trading somewhat positively while investors are primarily focused on soaring soft commodity prices, making the ongoing inflation even more challenging. India’s ban on wheat exports has sent ripple waves throughout the markets, even though India isn’t even the largest wheat producer. Investors and traders are worried that the ongoing conflict between Ukraine and Russia has disturbed the global supply chain of soft commodities. Now countries like India have started to secure their future food supply by banning the export of the essential soft commodity.
So far, the conflict between the US and Russia over Ukraine has brought us higher energy prices. The actual impact of this conflict has started to filter through, likely causing a bigger panic than anticipated. For instance, Italy is likely to be the hardest-hit economy in the Eurozone from soaring commodity prices, and Prime Minister Mario Draghi has already started to calm nerves. The UK, which is suffering from a double whammy, i.e., Brexit shock and higher energy prices, is likely to suffer even more from higher inflation. The warning from the Governor of the Bank of England, Andrew Bailey, has sent initial shock waves. He has warned higher food prices could have apocalyptic consequences. His warning isn’t limited to the United Kingdom but was also aimed at developing countries.
Investors and traders have a lot on their plates to worry about. The fact that Finland’s lawmakers have officially decided to join NATO will make the geopolitical tensions even more intense as President Putin has a clear warning that Finland and Sweden should not pursue such a journey. Finland and Sweden found comfort in taking such a journey as they have been highly encouraged by the US, which amplifies the tensions between the two superpowers: Russia and the US. Speculators believe that this particular move by Finland will trigger a significant reaction from Russia, keeping the volatility index where it is currently trading.
Forex
The economic data which has brought a rally for the EUR/USD pair is the US Empire State Manufacturing index which dipped in negative territory giving earlier signs that recession is on the doorsteps of the US. If the economic data begins to plunge the way the US Empire reading has, the odds are that the Fed will have a challenging time raising the interest rate at the current pace. This means speculations of a 75 basis point interest rate will be crushed, but the concept of the monetary policy staying on autopilot with an interest rate hike of 50 basis points in every single upcoming meeting could also come under jeopardy.
But traders need to keep one thing in mind, the fear of potential recession and its adverse influence is far more significant for the EU than the US. So any similar weakness in the EU is likely to make the EUR/USD parity calls even stronger.
Bitcoin
The digital gold is struggling to live up to its expectations, and by no means it is acting as a safe haven, at least for the time being. The collapse of Terra and Luna has made crypto investors highly cautious and brought back bad memories of the past. Terra’s crash has reminded traders how risky crypto investments are, and they should think before putting their savings in this asset class.
However, these memories may not have a lasting influence, and cryptos may see a rally. Such a rally can wipe out all previous memories and make new ones, as crypto traders remain highly motivated to invest more than they can afford because of its risk to reward ratio.
Gold
The precious metal has changed its recent course of action for the first time in four weeks. It is trading in positive territory as A weaker dollar is behind the current moves in the gold price. Three essential things will matter the most for the gold price today. Firstly, it is the speech by the Fed member James Bullard which is scheduled for 12:00 GMT and followed by that, we have the Core Retail Sales m/m, which is expected to show a less encouraging reading of 0.4% as compared to the previous number of 1.1%. And finally, the Fed Chairman’s speech at 18:00 GMT, whose main job will be to protect the Fed’s reputation by winning the confidence of market players that the Fed has things under control.